1. Ensure your Business Management Software is set up properly and get adequate training
Initially it is important to get your data file set up properly by someone who knows what they are doing, for example your accountant or business consultant. This small investment will bring a large return. A strong foundation, combined with quality training will empower you to manage your business.
2. Ensure all accounts are reconciled
Reconciliation should be performed on all accounts that you receive statements for, such as bank accounts, credit card accounts and term deposits. Once the reconciliation has been completed the reconciliation statement should be printed off and stapled to the front of the statements reconciled. Do not force a reconciliation to balance by using a miscellaneous entry.
3. Never post a transaction directly to a Control Account
A Control Account is a general ledger account that is used for summarising detailed individual accounts. An example of a Control Account is Trade Debtors which is a summary of all accounts receivable. Other examples include Trade Creditors, Inventory, GST Collected or GST Paid.
To work efficiently, transactions should never be posted directly to a control account. It is necessary to establish the individual account effected, and process the transaction through that account. However, there are limited exceptions to this rule.
4. Set up your linked accounts correctly and then don’t tamper with them
Business Management Software works quickly and efficiently through the use of linked accounts which allow transactions or journal entries to automatically happen behind the scenes. For example when you raise a Sales Invoice to a customer who pays you on credit, you may allocate the sale to the income line Consultancy Services, however the amount you are owed will be posted automatically to Trade Debtors. It will remain there until you receive the payment for the Sales invoice.
Linked accounts need to be set-up correctly on day one and then they should be left alone. Make sure you don’t accidentally change the name of a linked account or amend the links, unless you are really confident in what you are doing.
5. Restrict access to closed periods by utilising Locked Periods
Once the Business Activity Statements or Instalment Activity Statement has been prepared and posted to the Australian Taxation Office avoid adjusting any figures from previous periods by locking down the period just past.
If any adjustments are necessary they need to be made in the current period to be reflected in the future BAS/IAS. If adjustments to the data are simply made in earlier periods, the GST Reports for the present period will not reflect them and thus your GST claims or payments may be incorrect.
6. Establish a useful and relevant Chart of Accounts
The Chart of Accounts is the backbone of your business management reporting system and all transactions should be posted to the selected general ledger lines. It is your information so you need to include accounts that are relevant to your business, while ensuring that you are not creating new and unnecessary accounts.
It is a good idea to delete any accounts that are superfluous to your needs and make sure you select the correct default GST codes when setting up new account codes.
7. Enter a transaction using the actual date the transaction occurred on
When processing data enter the date the transaction actually occurred. If you paid the invoice last week but are processing it today you still need to use last week’s date when entering the transaction. This will ensure you are producing useful and accurate information.
8. Ensure a back-up of your data file is maintained on a regular basis
It is important to regularly back-up the data file and keep copies off site. Also test that you are able to restore the backed up data file.
9. Secure your data file by setting up passwords to access it
Utilise the password options available with your Business Management Software. An administrator password will allow access to the entire file, but passwords should also be set up for all users who access the data file including the accountant and bookkeeper. Passwords can both restrict access to sections of your data and monitor users movements.